The Nature of the Quebec Partnership: Moral Person...

The Nature of the Quebec Partnership: Moral Person,Organized Indivision or Autonomous Patrimony?

Michael Wilhelmson*

While French Civil law does not hesitate to recog-nize the moral personality of partnerships, Quebeclaw is ambiguous, which has led some authors toespouse the unsatisfactory theory that the partnershipis a "restrained" moral person. The author believesthat the influence of English law and the practise ofcommercial law are at the source of our hesitation torecognize the moral personality of partnership. Theissue of the juridical nature of partnership, however,is of great importance in interpreting legal provisionsor in deriving principles of suppletive law.

The author carefully analyses the legal rules ofthe Civil Code of Lower Canada and the Code ofCivil Procedure as well as the case law and doctrinepertaining to partnership in order to determine thepresent state of Quebec law. The author begins bydemonstrating that Quebec law clearly recognisesthat the partnership has a patrimony distinct fromthose of its members while rejecting the alternativethesis that partnership property is held by the part-ners in undivided co-ownership. According to theclassical theory of the patrimony, which establishesan identity between the notions of moral personalityand distinct patrimony, this observation would leadimmediately to the finding that partnership is a moralperson. But recent developments in Quebec lawbased on the notion of autonomous patrimony under-mine the identity thesis and any quick, clear conclu-sions as to the juridical nature of the partnership.Furthermore, the denial to the partnership of certainattributes of moral personality, most notably the rightto sue and be sued in its own name, leads the authorto conclude that it remains uncertain that partner-ships are moral persons, although a strong case ispresented in favour of such a conclusion. Turning tothe provisions to be introduced by the new CivilCode of Qutbec, the author notes that the last obsta-cles to the recognition of moral personality may havebeen removed. However, the Civil Code of Qudbecavoids explicitly recognizing the moral personalityof partnership, leaving it up to the doctrine andcourts to take the last remaining step towards its con-firmation.

Alors que le droit civil frangais n'h~site pas areconnaitre la personnalit6 morale de la socidt6, ledroit qurb6cois est divis6 quant A sa nature juridique,ce qui a donn6 lieu entre autres A la thse insatisfai-sante selon laquelle la societ6 ne serait qu'une per-sorme morale < restreinte >,. L'auteur est d'avis quec'est l'influence du droit anglais et la pratique dudroit commercial qui sont A l'origine de l'h~sitationque marque le droit civil quebrcois A recormalitre Iapersonnalit6 morale de la socidt6. Or ]a question dela nature juridique de la socirtd prend une impor-tance considrrable aussit6t qu'il s'agit d'interpr6terles dispositions de notre droit s'y rapportant ou d'end6duire un corps de r~gles suppl6tives.

L'auteur nous presente une analyse approfondiedes r~gles positives et jurisprudentielles concemant]a socirt6, ainsi que de l'analyse qu'en fait la doc-trine, afm de faire le point sur l'tat du droit quib6-cois. Dans un premier temps, il d6montre que le droitqurbrcois est unanime A reconnaitre que la socirt6possde un patrimoine distinct de ceux de sesmembres, et A rejeter la th~se selon laquelle lasocirt6 serait forme par la mise en commun de biensdemeurant la co-propri6t6 indivise des associ6s.Selon la theorie classique du patrimoine, qui voit uneidentit6 entre personnalit6 morale et possession d'unpatrimoine, cette conclusion mnerait directement hla constatation de la personnalit6 juridique de lasoci6t6. Cependant, dans un deuxi~me temps, l'au-teur indique que la reconnaissance plus r6cente endroit civil de l'existence de patrimoines d'affectationremet en cause la these classique ; de plus, 6tantdonn6 que certains attributs de la personnalit6morale, notamment le droit de poursuivre et d'Etrepoursuivi en son nom propre, ne sont pas reconnusla socirt6, l'auteur estime qu'il demeure incertainqu'elle jouisse en droit qubcois de la personnalit6morale, tout en presentant un argument convaincanten faveur de cette conclusion. Se tournant enfin versles dispositions du nouveau Code civil du Qudbec,l'auteur constate que les derniers obstacles a lareconnaissance de la personnalit6 morale de lasociet6 y sont peut-8tre levds ; cependant, le Codecivil du Quibec 6vite de reconnaitre explicitement lapersonnalit6 morale de la socidt6, laissant ainsi a ladoctrine et a la jurisprudence de franchir le derierpas vers sa consecration.

. LL.B, B.C.L., McGill University. An earlier version of this paper was awarded the WainwrightEssay Prize. I would like to thank Professor Madeleine Cantin Cumyn for her guidance and encour-agement in preparing this article. I would also like to thank Professor J.E.C. Brierley for his com-ments on earlier drafts.© McGill Law Journal 1992

Revue de droit de McGillTo be cited as: (1992) 37 McGill L.J. 995Mode de citation: (1992) 37 R.D. McGill 995

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Synopsis

Introduction

I. Recognition of a Separate Partnership PatrimonyA. Existence of Distinct Partnership PropertyB. Non-Retroactive Effect of PartitionC. Partners' Personal Rights in the PartnershipD. Creditor-Debtor Relationship between Partner and PartnershipE. Conclusion

II. Moral Personality of PartnershipsA. Moral Personality and the Structure of the Civil Code of Lower

CanadaB. Management Structure and Unanimity RequirementsC. Unlimited LiabilityD. Incapacity to Sue in its NameE. Validity of Contracts between Partner and Partnership

Conclusion

Introduction

Partnership is one of the oldest forms of business organization, tracing itslineage back to Roman law.1 It arose out of the basic human need to poolresources to achieve a common goal. This article will consider the nature of thepartnership governed by the Civil Code of Lower Canada (Code or C.C.L.C.)and as analyzed by subsequent doctrine and jurisprudence.

Partnership, as defined by the Code, has characteristics of both organizedindivision and the corporation, and this inherent ambivalence makes it impos-sible to resolve the doctrinal difficulties by simply compiling a list of partner-ship characteristics.2 A more fruitful approach, adopted in this article, is to con-sider the systemic bias towards the creation of moral persons in the Civil lawgenerally, and more particularly in the context of Quebec.

Post-revolutionary France until the end of the 19th century was dominatedby the theory of the legal fiction, under which moral persons could arise only

1B. Nicholas, An Introduction to Roman Law (Oxford: Clarendon Press, 1962) at 185.2See such a list in C. Houpin & H. Bosvieux, Traitj gdniral des socidtds civiles et comnerciales,

vol. 1, 5th ed. (Paris: A.J.N.A., 1919) at para. 35ff.

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NATURE OF THE QUEBEC PARTNERSHIP

by state intervention? This theory was subsequently rejected by Civilian schol-ars and jurisprudence and superseded by the reality theory, a view that certainpatrimonial associations are de facto entities in law with an existence independ-ent of their members.4 The modem Civil law thus enlists moral personality tofurther the collective interests of the group by allowing the partnership the mul-tiple advantages of civil existence, such as the ability to acquire rights and obli-gations.' In English law, by contrast, the creation of artificial persons is a matterof public law, an exclusive preserve of the state.6 An Anglo-American partner-ship, therefore, is not a distinct moral person.7

Quebec law is ambivalent regarding the nature of partnership because ofthe impact of French and English law on the legal system, as well as uniquedevelopments in Quebec law. The majority of doctrine and jurisprudence, mostof it relatively old, supports the modem Civilian approach set out above in find-ing that the Quebec partnership has a distinct patrimony and is therefore a moralperson! On the other hand, the adoption of English public law in Quebec has

3The capacity of moral persons to accumulate vast amounts of wealth was seen as a threat todemocracy. The Loi Le Chapelier (14 June 1791) abolished all corporations (R. Legeais, DroitCivil, vol. 1 (Paris: Cujas, 1971) at 109). The decree of 18 August 1792 provided that "a truly freeState suffers no corporations." See also M. Cantin Cumyn, "Les personnes morales dans le droitpriv6 du Qu6bec" (1990) 31 C. de. D. 1021 at 1029.

4J. Foyer, "Sens et port6e de la personnalitd morale des soci6tds en droit frangais" in S. Bastid,R. David & F Luchaire, eds, La personnalit6 morale et ses limites (Paris: L.G.D.J., 1960) 113 at116; G. Ripert, Traitd didmentaire de droit commercial, vol. 1, 8th ed. by G. Roblot (Paris:L.G.D.J., 1974) at 682. In 1891, the Cour de cassation recognized that civil as well as commercialpartnerships, are moral persons (Cass. Req., 23 February 1891, D.P. 1891.1.337). The same Courtin 1954 stated that moral personality is not created by law, but belongs in principle to all groupingswith the possibility of collective expression in the defence of legitimate rights (Cass. civ. 2e, 28January 1954, D.1954.Jur.217 (Annot. G. Levasseur)).

5The roots of civilian analysis are in Roman law. Although the Romans never evolved a coherenttheory of legal personality, associations could be formed freely since the XII Tables and weretreated as entities in law (Nicholas, supra, note 1 at 60). See M. Radin, Handbook of Roman Law(St. Paul, Minn.: West, 1927) at 266; Cantin Cumyn, supra, note 3 at 1028. After the Cataline con-spiracy, the Lex Julia de collegiis established a regime of state licences for associations, but R.Saleilles notes that these served only to make associations legal, they were not formal state grantsof moral personality, as found in modem corporate legislation (De lapersonnalitdjuridique, 2d ed.(Paris: Rousseau, 1922) at 61). However, the Romans did not view the ordinary contract of part-nership as creating a new entity (P.F. Girard, Manuel dldmentaire de droit romain, 8th ed. (Paris:Rousseau, 1929) at 611).6Moral personality is a matter of public, not private, law (Cantin Cumyn, ibid. at 1025; E.C.Monk, "Partnership - The Theory of the Legal Entity" in Le droit civilfrangais : livre-souvenirdesjournes du droit civil frangais (Montreal: Barreau de Montr6al, 1936) 479 at 503). J.C. Graywrites that with the exception of the State, "corporations are the only juristic persons known to theCommon Law" (The Nature and Sources of the Law, 2d ed. (New York: MacMillan, 1924) at 55).He adds: "The State may not have created a corporation, but unless it recognizes it and protectsits interests, such corporation is not a juristic person..." (ibid. at 57).

7R.L. Simmonds & P.P. Mercer, An Introduction to Business Associations in Canada (Toronto:Carswell, 1984) at 48. Before the ascendancy of the Common law, the law merchant in England(lex mercatoria) viewed the partnership as an entity (J.A. Crane, Handbook of the Law of Partner-ship (St. Paul, Minn.: West, 1938) at 4, 10; W.B. Lindley, Lai of Partnership, 15th ed. by E.H.Scamell & R.C. I'Anson Banks (London: Sweet & Maxwell, 1984) at 33).

sP.B. Mignault, Le droit civil canadien, vol. 8 (Montreal: Wilson & Lafleur, 1909) at 186; A.Perrault, Traiti de droit commercial, vol. 2 (Montr6al: A. Levesque, 1936) at 433; H. Roch & R.

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carried with it English notions of corporate law. Therefore, some doctrine andjurisprudence, as well as most practitioners, espouse the Anglo-American con-ception of moral personality - that the only true moral person must be createdby state incorporation and that partnership must be viewed as a form of orga-nized indivision.9 Finally, the Quebec legislator has recently indicated a willing-ness to allow autonomous patrimonies or patrimonies without owners, whichruns against the majority position in French and Quebec doctrine. This devel-opment raises doubts about the simple equation: where there is a distinct patri-mony, there must be a distinct personality. Therefore, it is possible to view part-nership as an autonomous patrimony.1°

An intermediate theory has developed in Quebec to resolve these contra-dictory influences: the theory that partnership is somehow a "restrained" or"imperfect" moral person." This theory should be rejected as a needless com-plication of an already complex subject. A hierarchy of moral persons with thecorporation at the top is not only bad law, but serves no practical purpose,whereas a clear conception of the nature of partnership as either moral person,organized indivision or autonomous patrimony provides the suppletive ruleswhere the law is silent or ambiguous. 12

Par6, Traitd de droit civildu Quibec, vol. 13 (Montreal: Wilson & Lafleur, 1957) at 339; N. L'Heu-reux, Prdcis de droit commercial du Qudbec, 2d ed. (Quebec: P.U.L., 1975) at 162, 171; J. Smith,"La personnalit6 morale des groupements non constitu6s en corporation" (1979) 81 R. du N. 457at 462; A. Boh6mier & P.P. C6t6, Droit commercial gdneral, vol. 2, 3d ed. (Montr6al: Th6mis,1986) at 20; J.-P. Verschelden, "Accidents du travail et soci~t6" (1966) 26 R. du B. 586 at 588.

There is disagreement as to whether this conclusion is founded upon the reality of the partner-ship entity (N.N. Antaki, "Commentaires concemant le contrat de soci6t" (1988) 29 C. de D. 1019at 1033) or upon the implied intention of the legislator (Perrault, ibid. at 431). Ironically, impliedintention was rejected in Quebec in the case of labour unions (Society Brand Clothes Ltd v. Amal-gamated Clothing Workers of America, [1931] S.C.R. 321, 3 D.L.R. 361), although not in EnglishCanada (International Brotherhood of Teamsters v. Therien, [1960] S.C.R. 265, 22 D.L.R. (2d) 1),results that run counter to the traditional biases of each system towards the creation of moral per-sons.

9Monk, supra, note 6; G. Trudel, Traitg de droit civil du Qudbec, vol. 2 (Montreal: Wilson &Lafleur, 1942) at 453ff.; Brown v. Taylor (1905), 28 C.S. 462. Cantin Cumyn criticizes this narrowconception of moral personality (supra, note 3 at 1035-36), although she doubts the Quebec part-nership has moral personality because this would run counter to the underlying premise of Quebeclegislation granting moral personality (ibid. at 1039). Further, she argues that the inability of a part-nership to sue in its name precludes this result (ibid. at 1039-40).

10See Bill 125, Civil Code of Quibec, 1st Sess., 34th Leg. Qu6., 1990-91 (assented to 18 Decem-ber 1991, L.Q. 1991, c. 64), art. 1256ff. [hereinafter Civil Code of Quebec or C.C.Q.].

"Perrault, supra, note 8 at 435; Smith, supra, note 8 at 466, 470; M. Liz6e, "Deux fictions dedroit corporatift (1983) 43 R. du B. 649 at 656. Boh6mier & C6t6 write: "On ne peut donc pr6-tendre que Ia soci6t6 commerciale soit une personne morale parfaite ou complete" (supra, note 8at 28). This theory is also given some support by Roch & Par6, supra, note 8 at 340; Mignault,supra, note 8 at 186-87. See also Nodl v. Petites Soeurs Franciscaines de Marie, [1967] C.S. 1 at6 [hereinafter Noel].

' 2The clearest statement of this was made by two American writers, W.A. Klein & J.C. Coffee,Business Organization and Finance: Legal and Economic Principles, 3d ed. (New York: Founda-tion Press, 1988) at 67:

[I]t is clear as a matter of experience as well as logic that one can resolve problemsof partnership law without taking a position on the entity-aggregate issue. The factremains, however, that where issues are not resolved by statute, courts often do rely on

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In Part I of this paper, I consider the attributes of the Quebec partnershipthat support its characterization as a distinct patrimony rather than as organizedindivision. I also illustrate the use of patrimonial distinctiveness to supplementthe law. According to the classical doctrine of the patrimony, this finding wouldlead us directly to the conclusion that the partnership is a moral person.

In Part II, I consider whether partnership is a moral person in the modem,more textured, context of Quebec doctrine. A strong case is made that partner-ship is or should be considered a moral person, but any conclusion as to the cur-rent state of the law must be more circumscribed because of the presence ofautonomous patrimonies in Quebec law: partnership has a distinct patrimony,but may not necessarily be a moral person.

Nonetheless, the formal recognition by doctrine, the courts or the legisla-ture that a partnership has a distinct patrimony and that patrimonial distinctive-ness is to be used in a suppletive manner would lead to a more consistent inter-pretation of the current and reformed law of partnership.13 It would also betterreflect the changes in the new Civil Code of Quibec that lend even greater sup-port to the partnership's patrimonial autonomy.1

I. Recognition of a Separate Partnership Patrimony

The Civil Code of Lower Canada does not expressly state that partnershipshave a patrimony. The codal provisions are ambiguous and could feasibly havebeen interpreted to give life to a theory of organized indivision.15 In this concep-tion, a distinct patrimony is unnecessary because the partnership's assets can becharacterized as undivided.

one concept or the other in reaching their results. Moreover, it seems fair to say thatan awareness of the concepts may help to organize one's thinking about issues.

One author has argued that "restrained" personality entails, where the Code is silent, that thegeneral law of indivision provides the suppletive rules (Perrault, supra, note 8 at 431).

13See arts 2186-2249 C.C.Q. This article will not deal with the implications of the overhaul ofFrench partnership law - in 1966 to commercial partnerships (Loin 66-537 du 24 juillet 1966,J.O., 24 July 1966, 6357, D.1966.LUg.342) and in 1978 to civil partnerships (Loi n 78-9 du 4 jan-vier 1978, J.O., 5 January 1978, 179, revised, J.O., 15 January 1978, 378, D.1978.Ieg.69) -which hinged moral personality on registration (see art. 1842 Code civil des Frangais [hereinafterC. civ.] and art. 5 of the 1966 law). Early proposed reforms in Quebec, since abandoned, adopteda similar approach (Draft Bill, An Act to add the reformed law of obligations to the Civil Code ofQudbec, 2d Sess., 33rd Leg. Qu6., 1988 [hereinafter Draft Bill], art. 2251).

References to the Code civil des Frangais (1804) are to those provisions prior to the 1978reform. The partnership provisions of the Code civil des Frangais mirror to a large extent the pro-visions of the Civil Code of Lower Canada (1866).

14See, for example, art. 2225 C.C.Q., which allows a partnership to sue and be sued in its name.15According to this theory, partnership assets are co-owned (or in a state of indivision). However,

indivision alone is insufficient to create a partnership: see art. 1830 C.C.L.C. or, in Common law,the Partnership Act, R.S.O. 1990, c. P-5, s. 3(1). "Organized" indivision requires the presence ofa management structure and limitations on the power to dissolve the regime, which run counter tothe precarity of indivision represented by art. 689 C.C.L.C. For example, art. 1895 C.C.L.C. holdspartners liable if they dissolve the firm at an inopportune moment. One author has noted that the"patrimoine social" distinguishes partnership from indivision, but this already presupposes that thepartnership has a patrimony (P.P. Crt, "Considrations sur la conception et l'61aboration du contratde soci6t" (1985) 15 R.D.U.S. 487 at 520).

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The jurisprudence shows, however, a systemic bias against organized indi-vision and towards the use of patrimonial distinctiveness to supplement the lawwhere the Code is silent or ambiguous. This Part sets out the process by whichthe existence of a distinct partnership patrimony was inferred from Book III,Title Eleventh of the Code.

A. Existence of Distinct Partnership Property

If partnership were viewed as a form of organized indivision, the propertycontributed by the partners to the partnership would be held in common, subjectto the special restrictions of the regime. The partnership itself, not having a pat-rimony, would own nothing. By contrast, the Civil Code of Lower Canada con-tains a number of provisions that indirectly support the conclusion that the part-nership has a patrimony. For example, there is a reference to "partnershipproperty" in articles 1838, 1899 C.C.L.C. and 115 C.C.P., while other provisionsdeal with the partner's right to use "things belonging to the partnership" (article1851(2) C.C.L.C.).16 These references alone are not decisive, however, as theycould easily be construed as a convenient shorthand for property held in indi-vision. 7

Of greater significance is article 1899 C.C.L.C., which is often cited asproof of a distinct partnership patrimony. I" Although the article also refers to"property of the partnership," the treatment given partnership property after dis-solution goes a step further. Rather than treating the partnership property as partof each partner's patrimony, the article states that it is to be applied19 to the pay-ment of the creditors of the firm in preference to the separate creditors of thepartners. Only if this property proves insufficient, does article 1899 provide thatthe separate property of the partners is to be applied to pay the partnership debts,subject to the preference enjoyed by the personal creditors of the partners.2

' By

16See also arts 1851(3), 1851(4), 1898 C.C.L.C., which refer to "property of the partnership."Art. 1852 C.C.L.C. refers to "any thing which belongs to the partnership."

17Monk, supra, note 6 at 490. The author writes: "If precedent is needed for this use of a singleword for convenience to denote the collectivity of interest, it is to be found in the use of the wordcommunity for the property relationship which arises upon marriage..." (ibid. at 491); G. Baudry-Lacantinerie & A. Wahl make the same point in regard to the Code civil des Frangais (Traitd thdo-rique etpratique de droit civil: Socidtj (Paris: L.S.R.L.A., 1898) at 10). Another example of thislinguistic style is to be found in the law of trusts (arts 981a ff. C.C.L.C.). To this effect, Trudelwrote that the assets of a civil partnership are the undivided property of the partners (supra, note9 at 456).

l8Art. 1899 C.C.L.C. reads as follows:1899. The property of the partnership is to be applied to the payment of the creditors

of the firm, in preference to the separate creditors of any partner; and in casesuch property be found insufficient for the purpose, the private property of thepartners, or of any one of them is also to be applied to the payment of the debtsof the partnership; but only after the payment out of it, of the separate creditorsof such partners or partner respectively.

19The application would be by the partners or presumably by a liquidator (art. 1896a C.C.L.C.).2rhe Code civil des Frangais contains no equivalent to art. 1899 C.C.L.C. However, given the

recognition of a separate partnership patrimony in French law, jurists have held that the propertyof the partnership must be the common pledge of its creditors, in preference to the separate credi-tors of the partners. See Houpin & Bosvieux, supra, note 2, para. 35. Roman law never evolved

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treating partnership property in this way, the Code arguably assimilates the rulesgoverning partnership to those of the general law governing patrimonial rightsand obligations. In particular, article 1899, the argument goes, makes allusionto the rule that the mass of a person's assets is liable for the fulfilment of hisor her personal obligations (article 1980 C.C.L.C.), and the rule that the propertyof a debtor is the common pledge of his or her creditors (article 1981C.C.L.C.). 2' The common pledge is fundamental to the classical theory of thepatrimony, creating a universality of rights and obligations." It is therefore com-monly inferred from article 1899 that the partnership has a patrimony. Becausearticle 1899 applies to both civil and commercial partnerships, it would followthat both have distinct patrimonies, and this is indeed the dominant view, -although a vocal minority, basing itself on older French authorities, has held thatonly commercial partnerships have patrimonies.24 This doctrinal debate hasbeen settled by the new Civil Code of Quebec, which eliminates the distinctionat article 2188.'

Article 1899 C.C.L.C. is not, however, as decisive as the authorities havecontended and could have been interpreted consistently with a theory of orga-

this notion in its partnership law because of a strict view of the relativity of contract: contractingparties could not set up a new entity against third party creditors (L. Michoud, La thiorie de lapersonnalitd morale, vol. 1, 2d ed. (Paris: L.G.D.J., 1924) at 148).

2 1Art. 1981 C.C.L.C. reads as follows:1981. The property of a debtor is the common pledge of his creditors, and where they

claim together they share its price rateably, unless there are amongst them legalcauses of preference.

22p. Ciotola, Droit des sdretds, 2d ed. (Montreal: Th6mis, 1987) at 7.23Mignault, supra, note 8 at 186-87; Smith, supra, note 8 at 462; L'Heureux, supra, note 8 at

162, 171; Roch & Par6, supra, note 8 at 339; Liz6e, supra, note 11 at 656; Boh6mier & C6td, supra,note 8 at 20; Verschelden, supra, note 8; Case Comment on Desjardins v. Malenfant et aL, [1961]R.L. 560 at 571 [hereinafter Case Comment]; Babineau v. Thdroux (1889), 16 Que. L.R. 4 at 5;Sale v. Cripeau (1905), 28 C.S. 423 at 431 (law firm); Noel, supra, note 11 at 7, where LacroixJ. cites Mignault approvingly. See more recently Sous-ministre du revenu du Qudbec v. Jobin,[1971] C.S. 565 at 569 [hereinafter Jobin].

24Using the classical doctrine of patrimony, this also meant that only commercial partnershipswere moral persons. See Frenette v. Aqueduc St-Gilbert (1931), 69 C.S. 167 [hereinafter Frenette];Tison v. Boisseau (1900), 6 R.J. 538 at 539; Girard v. Rousseau (1887), 31 L.C. Jurist 112 at 113[hereinafter Girard]; Antaki, supra, note 8 at 1033-34. See also J.-L. Baudouin & Y. Renaud, Codecivil annotd (Montreal: Wilson & Lafleur, 1988) at 557, citing Frenette, ibid Other authorities areambiguous on the status of civil partnerships. See Perrault, supra, note 8 at 433; Garneau v. Dra-peau (1939), 77 C.S. 350.

However, the distinction in French law was based on former art. 49 of the Code de commerce(repealed by Ddcret n 58-1359 du 27 ddcembre 1958, J.O., 29 December 1958, 11971,D.1959.Lag.137), which stated: "L'association en participation ne constitue pas une personnemorale," implying that all other commercial partnerships were moral persons. There is no equiva-lent article in Quebec, where most of the rules of commercial and civil partnerships have been uni-fied (Mignault, ibid. at 181). Further, even French jurisprudence rejected this interpretation in 1891(see supra, note 4). A possible argument based on a distinction in the effect of partition in art. 1898C.C.L.C., as well as on art. 115 C.C.P. has never been explored. See infra, note 41.

25Art. 2188 C.C.Q. reads as follows:2188. Partnerships are either general partnerships, limited partnerships or undeclared

partnerships.Partnerships may also be joint-stock companies, in which case they are legalpersons.

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nized indivision. One author argues that article 1899 adopts an English bank-ruptcy rule and was never intended to create a separate patrimony.26 This is acredible position. Article 1899 is located in the chapter on the effects of disso-lution and only comes into effect, it is argued, after the partnership has "ceasedto exist."2 7 It would therefore seem to be an unusual article upon which to relyto prove the existence of a partnership patrimony. Article 1899 also differs inimportant respects from article 1981. Rather than referring to a "claim" by acreditor on the partnership patrimony, article 1899 states that the property "is tobe applied" to the payment of partnership creditors. Article 1899 could thereforebe regarded as a rule of convenience, based on English law,' which the codi-fiers intended to deal with the distribution of common property after dissolution.On the other hand, although article 1899 is found amid provisions on the effectsof dissolution, the article still purports to apply "the property of the partnership"in payment of the creditors of the firm. This "property" is not itself an effect ofdissolution.29 In addition, it is incorrect to argue that article 1899 only appliesafter the partnership has "ceased to exist." Given that the mass is left intact untildistribution, the jurisprudence has held that the partnership patrimony continuesto exist until liquidation, for the purposes of the liquidation." Article 1899 hasalso been the major source of the evolution of a sui generis notion of suretyship,discussed below,31 which only has application prior to the dissolution of thepartnership at which point article 1899 applies. Finally, although the languageof article 1899 differs from article 1981, the paymentpro rata of the partnershipcreditors is consistent with that principle.32

In conclusion, article 1899 can support the view that partnerships have adistinct patrimony, and has been so interpreted. It would be incorrect (or anoversimplification), however, to suggest that the article prevents an interpreta-tion more consistent with organized indivision. The interpretive choice - orcoinflip - of the jurisprudence and doctrine is thus the first example of the useof patrimonial distinctiveness as a suppletive rule.33

26Monk, supra, note 6 at 495-96. Art. 1899 is derived from An Act respecting Partnerships,C.S.L.C. 1861, c. 65, s. 6 (Civil Code of Lower Canada: Sixth Report (Quebec: G.E. Desbarats,1865) at 32, 135). Monk traces this to an earlier English rule applicable by reception to Upper Can-ada (ibiL at 495).

Monk also argues that the mercantile system of settling accounts (citing F. Pollock, A Digest ofthe Law of Partnership, 5th ed. (London: Stevens, 1890) at 160) whereby the partnership can com-pete equally with a partner's individual creditors for debts owing the partnership because of aninsufficiency of partnership funds, is more consistent with a distinct patrimony than the preferencesystem set up by art. 1899 (Monk, ibid. at 496).

27Monk, ibid. at 493.28The corresponding English rule to art. 1899 C.C.L.C. has been criticized as having no logical

foundation. One jurist called it "an empirical way of dealing with a pressing necessity" (Pollock,supra, note 26 at 141).29Assuming we reject the argument that this reference is a shorthand for organized indivision.

30In Block v. Carrier (1906), 30 C.S. 37, the Court relied for its holding on art. 1892 C.C.L.C.,as modified by art. 1897 C.C.L.C. Art. 1899 C.C.L.C. can also be seen as maintaining the entitydistinct for the purposes of liquidation. See, however, the effect of partition, below, Part I.C.3 1See below, Part II.C.

32 Ciotola, supra, note 22 at 8.33Art. 1899 does not survive in its current form in the provisions on dissolution of the Civil Code

of Qudbec, although it appears to have survived in substance. See the combined effect of arts358-364, 2221(2), 2235 C.C.Q.

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NATURE OF THE QUEBEC PAIRTNERSHIP

B. Non-Retroactive Effect of Partition

Upon the dissolution of the partnership, a partner can demand a partitionof the "property of the partnership. '34 This partition must be made in accordancewith the rules relating to the partition of successions, "in so far as they can bemade to apply."'35 With respect to commercial partnerships, the rules of succes-sions are only to be applied when they are "consistent with the laws and usagesspecially applicable in commercial matters" (article 1898(2) C.C.L.C.). Theeffect of partition in the general law of successions is that each co-owner isdeemed to have inherited alone and directly all the things comprised in his orher share. Thus, partition is declaratory of rights (article 746 C.C.L.C.). 3 6

The wholesale application of the principle of retroactivity brought about byarticle 746 to partnerships would mean extinguishing the partnership's period ofownership, and with it, its patrimony. Under the classical doctrine of the patri-mony, the partnership would never have existed as a person. The only interpre-tation consistent with this would be that partnership is a form of organized indi-vision. This view is supported by Pothier, who wrote that the act of partition hasa retroactive effect; the things passing to the partners are deemed always to havebelonged to them, either from the time the partnership was formed or from thedate the thing was acquired by the partnership.37 Pothier also wrote that eachpartner is deemed never to have had any rights in any thing passing to the otherpartners.38 Partition is not a mode of acquiring property and thus no partneracquires anything from his or her co-partners by the act of partition.39

French and Quebec jurists later rejected Pothier's interpretation as incon-sistent with the existence of a distinct partnership patrimony.4" It followed that

34Art. 1898 C.C.L.C. reads as follows:1898. Upon the dissolution of the partnership, each partner or his legal representative

may demand of his copartners an account and partition of the property of thepartnership; such partition to be made according to the rules relating to the par-tition of successions, in so far as they can be made to apply.Nevertheless, in commercial partnerships these rules are to be applied only whenthey are consistent with the laws and usages specially applicable in commercialmatters.

35Art. 1898(1) C.C.L.C.36Art. 746 C.C.L.C. reads as follows:

746. Each copartitioner is deemed to have inherited alone and directly all the thingscomprised in his share, or which he has obtained by licitation, and to have neverhad the ownership of the other property of the succession.

37M. Bugnet, ed., Oeuvres de Pothier, vol. 4 (Paris: Marchal et Billard, 1890) at 306-07 n. 2.38 1bid.39Art. 583 C.C.L.C. reads as follows:

583. Ownership in property is acquired by prehension or occupation, by accession, bydescent, by will, by contract, by prescription, and otherwise by the effect of lawand of obligations.

4 0Bugnet wrote that Pothier's view of partnership as an "6tat d'indivision" was incorrect becauseduring the life of the partnership, "il y a un propriftaire unique, c'est la socift" (supra, note 37at 307 n. 2). Quebec doctrine rejected Pothier's interpretation, despite the codifiers' extensive reli-ance on him in their sixth report (supra, note 26). See Mignault, where he added: "I1 n'y a aucundoute, a mes yeux, que notre code [at art. 1899 C.C.L.C.], plus encore peut-atre que le code Napo-1Mon, individualise ]a socift6" (supra, note 8 at 276).

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if partition could not have retroactive effect to the date when the asset was con-tributed, the retroactive effect must be limited to the date of dissolution, whichis the law today.41 If partition is not declaratory of rights, it must be translatoryand an alienation or, more accurately, a transmission must occur in favour of thepartners upon dissolution.42 Although article 583 C.C.L.C., which enumeratesthe modes of acquisition of property, does not expressly mention partition, thetransmission in favour of partners can be included within the phrase "and oth-erwise by the effect of law." As in the case of article 1899, in the face of theambiguous language of the Code, the text has been interpreted consistently withpatrimonial distinctiveness.

C. Partners' Personal Rights in the Partnership

If a partnership has a distinct patrimony, it alone has title to partnershipproperty. The partners would not be titularies of real or personal rights in spe-cific partnership property, but would have shares (personal rights) in the partner-ship patrimony as a whole. Given the existence of a patrimony in both civil andcommercial partnerships, there would be no difference in the nature of theshares.

The evidence that the Civil Code of Lower Canada regards a partner'sshare as personal, and thus moveable in nature, can be found in article 387,which defines moveables by determination of law.43 The article clearly applies

41Mignault, ibid. at 275-76. See also Roch & Par6, supra, note 8 at 488. One practical effect ofrecognizing the partnership's period of ownership is that a partner cannot benefit from the principleof art. 746 C.C.L.C. to retroactively acquire ownership of an immoveable, for example in order tomeet the property qualifications in an election (see Girard, supra, note 24). In Girard, the Courtnoted, erroneously, that art. 746 would have had its full effect with regards to a civil partnership,because such a partnership did not have a distinct patrimony and was not a moral person. A dis-tinction in the application of the retroactive effect of partition to civil partnerships is hinted at byart. 1899(2) C.C.L.C. and might well have formed the basis of an argument - along with art. 115C.C.P., which permits a suit against a commercial partnership in its name - that only commercialpartnerships have distinct patrimonies. However, given that art. 1899 C.C.L.C. applies to both civiland commercial partnerships, art. 746 must be limited in its application in either case.42Mignault preferred the analogy to the succession of a person's patrimony after death (P.B.Mignault, Le droit civil canadien, vol. 2 (Montr6al: C. Th6oret, 1896) at 441). But see Langloisv. Dubray (1900), 17 C.S. 328, which involved a provision in a lease of an immoveable ownedby a partnership stating that the lessor could resolve the lease upon an alienation of the immove-able. At dissolution, the immoveable was transferred to one of the partners, who then invoked theclause to terminate the lease. The Court held that the transfer had the effect of ending the state ofindivision between the partners (art. 747 C.C.L.C.), but was not an alienation (art. 746 C.C.L.C.);the partner who acquired the immoveable being deemed owner when the lease was formed.

Although the reasoning in Langlois v. Dubray (ibid.) is inconsistent with non-retroactivity, theresult may not be. If, as Mignault suggested, the partner acquires rights from the partnership bysome unique form of transmission, the "alienation" clause would not be triggered. However, thepartner would remain liable because he succeeds to a portion of the juridical personality of the part-nership (arts 607, 1632 C.C.L.C.), which includes personal obligations (the lease). The partneracquires the immoveable by derivative title, but remains personally bound.

43Art. 387 C.C.L.C. reads as follows:387. Those immoveables are moveable by determination of law, of which the law for

certain purposes authorizes the mobilization, so are all obligations and actionsrespecting moveable effects, including debts created or guaranteed by the prov-

1004 [Vol. 37


to "shares or interests" in corporations and states that they are to be regardedas moveables, although the corporation owns immoveables.'

But does the provision apply to partnerships? Far from providing a clearstatement, article 387 is exceedingly ambiguous. It refers only to a "partner" ina "company" - not in a partnership." Therefore, it is possible that it neveroccurred to the codifiers that the words in article 387 would be "stretched tocover ordinary commercial partnerships."46

The last sentence of the French text of article 387 contains the phrase "tantque dure la soci6t6." This last sentence could be interpreted as applying only to"soci6t6s par actions," but it could also be viewed as a separate rule applicableto partnerships by which the immoveable effects of all partnerships are deemedto be moveable as regards the partners.4 7 Thus, a link could be made betweenthe French word for partnership (societe) and "company," its equivalent in theEnglish text, which opens the way to interpreting the entire article as applicableto partnerships.4"

The ambiguity of article 387 may be attributable to poor drafting, but theauthorities have made no serious attempt to unravel the Gordian knot. Instead,

ince or by corporations, also all shares or interests in financial, commercial ormanufacturing companies, although such companies, for the purposes of theirbusiness, should own immoveables. These immoveables are reputed to be move-able with regard to each partner, only so long as the company lasts.

The article is the same in substance as art. 529 C. civ.44A French author has noted that in the absence of such a provision, the character of the share

would depend on the variable content of the corporate patrimony (Foyer, supra, note 4 at 120).45The only other use of the word "company" by the codifiers with respect to partnerships is to

be found in the provisions on joint-stock companies (arts 1889-1891 C.C.L.C.). Art. 1889 C.C.L.C.mentions three types of "companies," but only those that are formed without legislative authorityor royal charter are to be treated as general partnerships. The other companies are corporations:companies incorporated by royal charter, by special act, or under provisions of a general act.

46Monk, supra, note 6 at 499.47Mignault noted that these immoveables would maintain their immoveable nature as regards the

partnership (supra, note 42 at 442). This interpretation does not directly address the nature ofmoveable rights, though the authorities have perhaps assumed that the purpose of deemingimmoveables to be moveable is a recognition that a partner's entire right is personal and, thus,moveable. This would be consistent with the general omission of the codifiers to use the languageof real and personal rights. Mvignault explains the sentence as an attempt to reconcile the "fiction"of the partnership's period of ownership. Although partners have an eventual right to partnershipproperty, their right to partition is wholly moveable (ibid at 438-42).

4SThere are other interpretive difficulties. If we proceed on the assumption that art. 1899C.C.L.C. is conclusive that a partnership has a patrimony, why deem a partner's share to be per-sonal? It must be personal because the partnership is sole owner of its property, thus making art.387 C.C.L.C. redundant. By the same reasoning, the transmuting could even be seen as evidencethat partnerships do not have a patrimony and that art. 1899 has been wrongly interpreted. On theother hand, this argument also applies to corporations - a shareholder having no right in any thingbelonging to the moral person - which are clearly covered by art. 387. (This redundancy explainsperhaps the absence of an equivalent provision in the Civil Code of Qudbec at arts 899-907). Buteven accepting that the article is an instructive redundancy, why does art. 387 C.C.L.C. seem todeal only with commercial partnerships ("shares or interests in financial, commercial or manufac-turing companies")? This is not a problem if we read the last sentence as independent of the first,in which case civil partnerships would be included.

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they have been content to declare article 387 conclusive evidence of the per-sonal nature of the partner's share.4 9

One basis for the categorical acceptance of this theory in the face of textualdifficulties is the acceptance of juridical effects consistent with this view. Forexample, the Code itself provides that a partner cannot alienate or otherwise dis-pose of anything that belongs to the partnership (article 1852).50 Jurisprudencehas elaborated other related principles consistent with a distinct patrimony:creditors of the partners can only seize a partner's share, not any thing ownedby the partnership;1 a partner cannot sell an undivided share of a partnershipmoveable or immoveable to a third party52 or grant hypothecs on partnershipproperty to secure personal debts; 53 and, finally, partnership property is not sub-ject to the legal hypothecs that burden the personal patrimonies of the partners. 4

Patrimonial distinctiveness is particularly helpful in these areas in ensuring therelative simplicity and clarity of legal results, and this may well be a motivatingfactor in the Civilian bias towards finding a distinct partnership patrimony amidthe vague language of the Code.

491n France, the use of the word "socit" without qualification in the last sentence of art. 529C. civ. was held to prove that all partnerships are moral persons with distinct patrimonies (Foyer,supra, note 4 at 115ff.; Houpin & Bosvieux, supra, note 2, para. 38; Cass. Req., 23 February 1891,supra, note 4), even though there seems to be a grammatical link to the commercial companieslisted in the first sentence. See also M. Planiol & G. Ripert, Trait 6ldnentaire de droit civil, vol.2, 10th ed. (Paris: L.G.D.J., 1926) para. 1958; Paris, 18 August 1881, S.1882.II.25 (Annot. M.Lyon-Caen). In Quebec, see Roch & Par6, supra, note 8 at 341; Smith, supra, note 8 at 470; L'Heu-reux, supra, note 8 at 171; Mignault, supra, note 42 at 338-42.

50See Poston v. Watters (1871), 2 R.L. 736 (Sup. Ct) (a partner has no right to dispose of part-nership property). Art. 1852 C.C.L.C. has been viewed as proof that the partnership has a separatepatrimony, as well as being further evidence that civil partnerships are moral persons because itapplies to all partnerships. See Houpin & Bosvieux, ibid., referring to art. 1860 C. civ., the Frenchequivalent of art. 1852 C.C.L.C.

But again, a prohibition to alienate is not necessarily inconsistent with a theory of organizedindivision: even if a partnership did not have a patrimony, a partner cannot prevent co-partnersfrom using partnership property according to their rights, so long as the partnership exists (art.1851(2) C.C.L.C.). Art. 1852 would flow from this principle. See Planiol & Ripert, ibid. para. 1957n. 1 referring to art. 1869 C. civ.; Monk, supra, note 6 at 497.

51In Babineau v. Thiroux, supra, note 23, a personal creditor of a partner sought to seize adebt due to the partnership. The Court held that the cession of the partner's share did not conveyan undivided share in the assets of the partnership. Only upon partition would the specific thingsbe assigned to the partners. See more recently Caisse Populaire Pontmain v. Couture, [1983] C.P.149.

52Kingley v. Smeall (1928), 66 C.S. 470 at 471. When the third party requested a partition, theCourt held that the disposition of the immoveable was null because the partner did not own anundivided half in any asset of the partnership, and "[tjhe partnership constituted a separate and dis-tinct entity from the person of those constituting it."53Case Comment, supra, note 23 at 571; Planiol & Ripert, supra, note 49, para. 1957.

54Cass. Req., 22 February 1898, D.P. 1899.1.593; Planiol & Ripert, ibid. By contrast, an undi-vided co-owner acts with respect to his or her real right in the thing as an absolute proprietor. Aco-owner can hypothecate the right, which will subsist with respect to that portion of the immove-able retained after partition (art. 2021 C.C.L.C.). See also W. Marler, The Law of Real Property,(Agincourt: Carswell, 1986) at 46-47. However, the Civil Code of Qudbec assimilates indivisionto partnership to the extent that a co-owner will no longer be free to burden the thing with realrights (art. 1026(2)).

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D. Creditor-Debtor Relationship between Partner and Partnership

The nature of the partner's share is only one aspect of the creditor-debtorrelationship that can arise between partners and partnership. Other manifesta-tions can be seen in articles 1831, 1839, 1840, 1842, 1843, 1844, 1845, 1847and 1851(3) C.C.L.C. For example, each partner is a "debtor to the partnership"- not the other partners - for all he or she has agreed to contribute to it (article1839 C.C.L.C.). ss The existence of a creditor-debtor relationship demonstratesthat the partnership has a patrimony distinct from those of the partners." Similarprovisions in the Code civil des Frangais have been interpreted in a similarmanner.

5 7

However, as noted above in another context, although the language of theCode evokes a separate partnership patrimony, the codifiers may only have beenusing a shorthand for a relationship between the individual partner and the col-lectivity.5" If there is a true creditor-debtor relationship, this would be reflectedin the nature of the actions by which debts are enforced. In other words, doesthe action by the partnership against partners belong to the partnership or to theother partners? Likewise, when a partner sues the partnership, is he or she suingthe partnership, or the other partners?

When a partnership sues a third party, it must do so in the name of all thepartners.59 But when it sues a partner as creditor (for example, under article1839 C.C.L.C.), the action is always taken by one of the partners. This is strongprocedural evidence that the action does not truly belong to the partnershipentity, but to individual partners - that there is no true creditor-debtor relation-ship and, therefore, that there is no distinct partnership patrimony.

However, the language of the jurisprudence illustrates that although it isthe partner who sues on a debt owed to the partnership - without even namingthe partnership - the action is treated as if it belonged to the partnership."0 The

55Principles of the general law, as set out in the Code or by interpretation, are also used to deter-mine the rights and obligations of partners and the partnership: when a partner contributes a certainand determinate thing, consent effects a transfer of ownership to the partnership, which is an appli-cation of art. 1025 C.C.L.C.; when the thing is uncertain and indeterminate, the partnership doesnot become owner until the thing becomes certain, which is an application of art. 1026 C.C.L.C.(L'Heureux, supra, note 8 at 173); the transfer of ownership carries with it the risks of destruction(art. 1839 C.C.L.C.; L'Heureux, ibid at 173); when the enjoyment of a thing is contributed, suchas usufruct, the risk is borne by the partner (art. 1846(1) C.C.L.C.); the partnership benefits fromthe warranties of sale as do other buyers as against the partner (art. 1839(2) C.C.L.C.; Mignault,supra, note 8 at 197; Roch & Par6, supra, note 8 at 369).

5aAs one author has written, "s'il y avait confusion de patrimoines, aucune relation de cranciera drbiteur ne pourrait s'ltablir" (Smith, supra, note 8 at 469).

57Houpin & Bosvieux, supra, note 2, para. 38; arts 1845-48, 1850 C. civ.58Monk, supra, note 6 at 490.59Dupuis v. Couture, [1958] C.S. 623 [hereinafter Dupuis].601n Whimbey v. Clark (1902), 22 C.S. 453, the defendant partner failed to furnish his share of

the required capital to a partnership. He secretly registered the business in his own name and tooksteps to transfer the business to a joint-stock company. The complaining partner launched an actionpro socio for the promised capital (art. 1839 C.C.L.C.), for an accounting, as well as dissolutionof the partnership. The Court found that the business carried on under the name registered by thedefendant belonged to the partnership existing between plaintiff and defendant and ordered the

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McGILL LAW JOURNAL

partnership patrimony is enriched by a successful action pro socio, not the pa-trimonies of the partners who initiate proceedings." Thus, although the partnerand partnership are not procedurally distinct persons - the partner being ableto sue on a partnership debt without naming the partnership" - there is no pat-rimonial confusion: the debts owed by a partner are owed to the partnership andnot to the partner who initiates the action. The gap in the law is between thenature of the obligation (a partnership creance) and the procedural devices toexercise it, namely the action pro socio.3

The next question is whether an action by a partner against the partnershipis, in fact, against the partnership as a distinct entity or against the other part-ners. Article 1847 C.C.L.C. states that a partner has a right "against the partner-ship" to recover money disbursed for it, or to be indemnified for obligationscontracted in good faith in the business of the partnership and for risks associ-ated with his or her management. 64 In practice, a partner's usual remedy will bethe actionpro socio for an accounting, including the condemnation of individualpartners left owing the others.' However, there is support for the conclusionthat the partner retains a right to take a direct action against the partnership,without necessarily asking for dissolution and an accounting.6 In Harrisson,67

defendant to hand over all properties, contracts, transactions and moneys belonging to the partner-ship. Because of the defendant's disloyalty towards the plaintiff, the Court also ordered the disso-lution of the firm.610nly the value of their shares increases, until dissolution and liquidation.

62In principle, the action should be launched in the name of the partnership, which is the trueplaintiff. When a corporate creditor sues one of its officers or shareholders, the action is initiatedin its corporate name. Even when a shareholder takes a derivative action to replenish the corporatepatrimony, this is done in the name of the corporation. See, for example, the Canada Business Cor-porations Act, R.S.C. 1985, c. C-44, s. 239(1).

-"his deficiency is not surprising given that the action has its origin in Roman law where thepartnership was not regarded as having a distinct patrimony. Roch & Par6 define the action prosocio this way: "C'est Faction qu'un associ6 a contre son ou ses associ6s pour les forcer A remplirleurs obligations et, apr~s la dissolution de la soci6t6, pour leur faire rendre compte" (supra, note8 at 490). This Roman law definition omits the function of the action in enforcing obligations owedby the partners to the partnership entity. However, the fact that the actio pro socio is personal innature suggests that the real titulary of rights is the partnership (R. Goldwater, "La soci6t6 civileest-elle une personne morale?" [1959-60] Th6mis 91 at 93).

An action outside the context of the actio pro socio is not possible here because of the require-ment that the defendant name himself as plaintiff.

64Art. 1847 C.C.L.C. reads as follows:1847. A partner has a right against the partnership not only to recover money disbursed

by him for it, but also to be indemnified for obligations contracted by him ingood faith in the business of the partnership, and for the risks inseparable fromhis management.

65See Mignault, supra, note 8 at 202; Leduc v. Turcot (1861), 5 L.C. Jurist 96 (Circ. Ct). Seealso Lydon v. Casey (1887), 13 Que. L.R. 237 (Q.B.), where after dissolution, a partner who hadpaid off a partnership debt (art. 1847 C.C.L.C.) tried to take a direct action against the other partnerfor half of what he had paid. The Court held that the plaintiff must first launch an action pro socioto establish whether he was a debtor or creditor on the partnership books. Only after an accountingcould it be established what the other partner owed. See also Harrisson v. Leclerc, [1956] Que.P.R. 283 (Sup. Ct) [hereinafter Harrisson].66Mignault, ibid: "Toutefois, et sauf A discuter cette question plus loin, on peut dire qu'en prin-cipe, et pendant l'existence de la socidt6, le droit d'action existe."

67Supra, note 65.

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the Court suggested that a partner can take a direct action against the partnershipby first naming the defendant partners and, second, either naming himself as adefendant partner or identifying himself as a partner in the declaration." Thisseems to assume that the partnership is civil. If commercial, there seems no rea-son, in principle, why a partner could not rely on article 115 C.C.P. and sue thepartnership in its name. 69 Only a partnership's patrimonial distinctiveness pre-vents the objection that, by taking a direct action, the partner is suing himself.

It follows that a true creditor-debtor relationship exists between partnersand partnership, both in terms of rights and in terms of actions. Again, the ela-boration of a consistent regime required the extensive reliance on suppletiverules based on a presumption of patrimonial distinctiveness.

E. Conclusion

It can be concluded without reservation that Quebec partnerships, bothcommercial and civil, have distinct patrimonies. Where the Code is silent orambiguous, its provisions are interpreted in accordance with the presumptionthat partnerships have a distinct patrimony.'

Much of the jurisprudence and doctrine cited above refers interchangeablyto partnership's distinct patrimony and its moral personality, creating an appa-rent circularity of reasoning that has never been properly addressed. The autho-rities leave open the argument that partnerships are moral persons and that thesuppletive rules are based not only on patrimonial distinctiveness, but on moralpersonality itself.7 However, a number of factors, addressed below, complicate

68Ibid. The partner sought to recover a debt owed him by the partnership from his other partners.However, as he had only demanded condemnation of his co-partners personally, and not the part-nership, his action was premature; the individual liability of each partner on the partnership booksmust first be established by actio pro socio for an accounting.

69Art. 115(5)-115(7) C.C.P reads as follows:115 ...

A corporate body is designated by its corporate name with mention of its headoffice. If it is a defendant, mention of the head office may be replaced by mentionof its principal place of business.A defending commercial partnership may be designated by its firm name; but ajudgment rendered against it is then executory only against partnership property.Any group of persons mentioned in article 60 may be designated under the namewhich it has adopted or by which it is commonly known, but a judgment renderedagainst it is then executory only against the property of the group.

7 0Another example of a suppletive rule based on patrimonial distinctiveness involves the com-pensation of debts, a subject upon which the Code is silent. Doctrine and jurisprudence considerthat the debt of a partner cannot be compensated against a creance of the partnership (Roch & Par6,supra, note 8 at 484; Gauthier v. Lacroix (1868), 12 L.N. 508). This conclusion can only be jus-tified if the partnership has a distinct patrimony.

71Would the distinct patrimony lead to the conclusion that it is a moral person or vice versa? TheDraft Bill, supra, note 13, as modified, seemed to state that moral personality was the suppletiverule:

2255. ... the rules respecting indivision, in the case of a joint venture, or respectinglegal persons, in the case of a partnership registered as a legal person, adaptedas required, apply in a suppletory [sic] manner to such relations. [emphasisadded]

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the traditional conclusion - or assumption - that moral personality means theachievement of patrimonial distinctiveness.

H. Moral Personality of Partnerships

A juridical person, subject of law, is a physical or moral person with anaptitude to enter into juridical relations with other persons, either to become thecreditor of a right or the debtor of an obligation. A moral person participates injuridical life through its mandataries. According to the classical doctrine of thepatrimony, all physical and moral persons have a patrimony or universality ofrights and obligations. The existence of a patrimony is the manifestation of legalexistence72 and is embodied in the principles of articles 1980 and 1981 C.C.L.C.(the common pledge). Thus, if the Civil Code of Lower Canada recognizes theexistence of a distinct partnership patrimony, then partnerships must be moralpersons, and this is indeed the conclusion of the majority of authorities cited inPart I.

But the hegemony of the classical doctrine has been challenged. A minor-ity of the doctrine has held that autonomous patrimonies can exist, that is, pa-trimonies that are owned by no one. This mass has been called a kind of col-lective property.73 In Quebec, the legislator has recognized the possibility ofautonomous patrimonies, as demonstrated for instance by reforms to the Quebeclaw of trusts.74 These developments, as well as the general acceptance in Quebecof the English approach to moral personality, challenge the simple equation ofpatrimony with personality, and it is open to argue that partnership has a distinctpatrimony but is not a moral person. The apparent irony of this position is thatpartnership property would be owned by the partnership entity, but the entitywould not be a moral person. This contortion of reasoning has led many authorsto reject any notion of a patrimony without an owner.75

A traditional compromise position is to call partnership a "restrained" orimperfect moral person. Although the classical equation leads us to the conclu-sion that partnership is a moral person, there are three principal areas where itcan be said that partnership personality is "restrained" as compared to the cor-poration: the management structure and unanimity requirements; the unlimitedliability of partners for partnership debts; and the incapacity of a partnership to

72See Legeais, supra, note 3 at 108-09, for definitions of juridical and moral personality. See C.Aubry & G. Rau for the classical doctrine of the patrimony (Cours de droit civilfrangais d'aprasla mithode de Zachariae, vol. 9, 5th ed. by E. Bartin (Paris: L.G.D.J., 1917) at 333-39; Ripert,supra, note 4, para. 681: "[Les] deux notions de personnalit6 et de patrimoine sont traditionnelic-ment lies dans la conception juridique frangaise"). See also Goldwater, supra, note 63 at 92.

73 See Smith, supra, note 8 at 460-61, for a discussion of what is often referred to as the theoryof the patrimony of appropriation. He considered the theory to have no supporters in Quebec andto be of little utility. See also J. Ghestin, Traitg de droit civil, vol. 1, Introduction goin&ale, 2d ed.by J. Ghestin & G. Goubeaux (Paris: L.G.D.J., 1983) at 155ff., for a discussion of the classical doc-trine.

74See arts 1260ff. C.C.Q.75Smith, supra, note 8. A subset of advocates of the patrimony by appropriation reject the notion

that a patrimony can be without a titulary, but accept that a person may be at the head of more thanone patrimony (Ghestin & Goubeaux, supra, note 73 at 157-58).

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sue in its name. The compromise is weak in a number of respects. First, I willargue that complete moral personality can support all the so-called restraints,with the possible exception of the incapacity to sue. Second, the argument sug-gested by one author76 that the suppletive rule to restrained personality is indi-vision (which Part I has already illustrated is not the law) shows the confusionthat underlies this theory. Therefore, this part will consider whether partnershipis a full moral person or an autonomous patrimony without moral personality.

A. Moral Personality and the Structure of the Civil Code of Lower Canada

Other than the classical doctrine linking a distinct patrimony with moralpersonality, there is no express assertion in the Civil Code of Lower Canadathat partnership is a distinct moral person. There is also no title governing thegeneral law of moral persons.77 Instead, Title Eleventh deals with "corpora-tions," their nature, creation and kinds.78 Article 353(1) states that corporationsare constituted by act of parliament, by royal charter or by prescription. Thereis no mention here of moral persons created by private agreement. The corpo-ration could therefore be viewed as exhaustive of moral persons in Quebeclaw.79 Some doctrine has taken this narrow approach" and there is no questionthat most practitioners in Quebec do not recognize the existence of moral per-sons other than the corporation.81 Thus, on this basis we would have to concludethat partnership is an autonomous patrimony without moral personality.

But the text of Title Eleventh is sufficiently vague so as not to preclude themoral personality of partnership. Nowhere in the provisions on corporations are

76 Perrault, supra, note 8 at 435.77This subject has also been ignored by Quebec writers generally. See discussion in Cantin

Cumyn, supra, note 3 at 1024 n. 8.78Arts 352ff. C.C.L.C. Arts 352 and 353 C.C.L.C. read as follows:

352. Every corporation legally constituted is an artificial or ideal person, whose exis-

tence and succession are perpetual, or sometimes for a fixed period only, and

which is capable of enjoying certain rights and liable to certain obligations.353. Corporations are constituted by act of parliament, by royal charter or by prescrip-

tion.Those corporations also are reputed to be legally constituted which existed at thetime of the cession of the country and which have been since continued and re-cognized by competent authority.

79Cantin Cumyn writes that although the codifiers certainly knew of the traditional Civil law

approach to moral personality, they were influenced by the theory of the legal fiction and relied

on English authorities in drafting this title (supra, note 3 at 1030ff.). She notes that the term "cor-poration" had a broader meaning in old French law ("I1 parait m6me avoir englob6 toutes les entit6s

juridiques alors admises" (ibid. at 1031)), which furthers the argument that the codifiers intended

that the corporation be the only moral person. It is also noteworthy that art. 17(11) states that the

word "person" includes bodies corporate, but makes no mention of other moral persons.

S0Trudel considered partnership to be a form of organized indivision (supra, note 9 at 456). See

also Monk, supra, note 6 at 503-04: "If artificial persons or juridical persons, other than corpora-

tions, do exist in our law, then the codifiers have left a lamentable gap in this book of our Code."Smith writes that the status of partnerships in Quebec was left in doubt by the Civil Code ofLower

Canada's ambiguity on the question of moral personality (supra, note 8 at 458). Perrault noted the

absence of an article, similar to art. 352, expressly granting moral personality to partnerships(supra, note 8 at 433).

8 1See Cantin Cumyn, supra, note 3 at 1046.

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other moral persons prohibited or corporations expressly made exhaustive ofmoral persons. Moreover, the vast majority of doctrine and jurisprudence, whichconsidered partnership both to have a distinct patrimony and to be a moral per-son, must have viewed the corporation as but one type of moral person.82

We have here one of the best examples of express provisions of the Codebeing interpreted to give effect to a more fundamental idea: the classical doc-trine of the patrimony. There is nothing unsound in this approach because Que-bec Civil law is no longer confined by the Judicial Committee's pronouncementthat the Civil Code of Lower Canada be interpreted as an ordinary statute. 3

Fundamental principles of the system can find their way through the obstaclesset, intentionally or otherwise, by the codifiers. This was affirmed by theSupreme Court of Canada in Cie Immobilire Viger v. Lauriat Gigure Inc.,'where the Court recognized the doctrine of unjust enrichment, even though it isnot expressly mentioned in the Code. Beetz J.'s reasoning is applicable to theslow recognition that partnerships are moral persons:

Modem French case law, along with practically all the writers, finally adopted [thetheory of unjustified enrichment] toward the end of the nineteenth century, aftera rather long period during which the silence of the Code had been interpreted aspreventing its adoption. ... [Legislative] support can also be found in an extrapo-lation from the numerous provisions of the Civil Code, that are only special appli-cations of it. The Civil Code does not contain the whole of civil law. It is basedon principles that are not all expressed there, which it is up to case law and doc-trine to developY

5

But this leaves open the question: what is more fundamental to QuebecCivil law, the classical doctrine of the patrimony or a narrow conception ofmoral personality?

B. Management Structure and Unanimity Requirements

Articles 1849-1851, 1873-1874 and 1881 C.C.L.C. set out the suppletiverules governing the management of the firm. As noted above, these rules havebeen used to justify the conclusion that partnership is a "restrained" moral per-son. This section examines whether the partnership management structure cansupport complete moral personality.

Like a corporation, the partnership patrimony cannot be made liable exceptthrough its mandataries. Thus, article 1851(1) C.C.L.C. creates a presumed

82Mignault, supra, note 42 at 327. Mignault wrote of partnerships: "Et d'abord it est certain qu'ilne s'agit pas ici de ces personnes fictives, crd~es par la loi et qu'on appelle des corporations..."(supra, note 8 at 186). In other words, there is more than one type of moral person in Quebec law.L'Heureux supported this interpretation when she wrote that of the four types of commercial part-nership, the general partnership (arts 1865-1869 C.C.L.C.), the anonymous partnership (art. 1870C.C.L.C.), the limited partnership (arts 1871-1888b C.CL.C.) and the joint-stock company (arts1889-1891 C.C.L.C.), the first three are private law moral persons, while the last one is a publiclaw moral person, i.e., a corporation in the sense of arts 352ff. C.C.L.C. (supra, note 8 at 179).

3Berthiaume v. Dastous, [1930] A.C. 79 at 85-87, 1 D.L.R. 849 (P.C.). See Monk, supra, note6 at 481, where the author attacks the recognition of the moral personality of the partnership onthe basis of statutory construction.

84[1977] 2 S.C.R. 67, 10 N.R. 277 [hereinafter cited to S.C.R.].85IbL at 75-76.

[Vol. 371012


mutual mandate between partners that has been interpreted to make the partnersmandataries of the'firm. 86 Moreover, by way of partnership agreement or by wayof contract of personal service, one or more managers can be selected fromamong the partners or third parties.87 Only a manager can alienate partnershipproperty (article 1852).'

One of the great advantages of moral personality is to allow the entity toact without the unanimous consent of its members behind the "corporate veil,"and without the need to resort to express mandates among shareholders. Oneauthor has written that majoritarianism is the logical consequence of moral per-sonality because the moral person is independent of its members, with a sepa-rate patrimony and mechanism of representation to engage that patrimony.89

In the case of partnership, nothing in the Code gives rights to the majority,and it is presumed, in the absence of the selection of managers, that the partner-ship decision-making process requires unanimity. Further, article 1849 statesthat a manager may perform only "acts connected with his management." Someacts deemed to exceed the management function are expressly dealt with in theCode. For example, no changes can occur in the immoveable property withoutunanimity (article 1851(4) C.C.L.C.)," so that a partner cannot hypothecate animmoveable,9 nor acquire an immoveable,9 without an express mandate fromthe other partners. Also the courts have held that "important" acts include modi-fications in the partnership agreement93 and the launching of actions in law.94

Thus, a dichotomy is created between "acts of management" and "important"acts requiring unanimity or express mandates.

The general view is that unanimity requirements are inconsistent withmoral personality. But this is a questionable proposition. In fact, given the needfor a mechanism to protect the interests of shareholders from the acts of mana-

86No~l, supra, note 11 at 7. This is yet another example of a rule consistent with organized indi-vision being interpreted to give effect to a distinct partnership patrimony and personality. Art.1851(1) C.C.L.C. reads as follows:

1851. If there be no special stipulation as to the management of the business of thepartnership, the following rules apply:1. The partners are presumed to have mutually given to each other a mandate

for the management, and whatever is done by one of them binds the others;saving the right of the latter, together or separately, to object to any act beforeit is concluded;

87 L'Heureux, supra, note 8 at 176ff.

88Art. 1852 C.C.L.C. reads as follows:

1852. A partner who has no right of management cannot alienate or otherwise disposeof anything which belongs to the partnership; saving the rights of third personsas hereinafter declared.

8 9Antaki, supra, note 8 at 1032. See also Smith, supra, note 8 at 457.90hus, the power of managers to alienate mentioned in art. 1852 C.C.L.C. includes only move-

ables.91Socidtd de Pr~ts et Placements v. Lachance (1896), 5 B.R. 11.92Damien v. SocigtJ de Pr~ts et Placements de Quibec (1896), 3 R.J. 32 (Q.B.).93Wemyss v. Poulin (1934), 57 B.R. 514 at 520-21 (The decision to acquire a mill previously

leased by the partnership was held to be outside the usual course and therefore subject to the una-nimity requirement).

94Dupuis, supra, note 59; L'Heureux, supra, note 8 at 178.

1992] 1013


gers in corporate law, they can be seen as necessary attributes of moral person-ality. The fundamental change provisions of the Canada Business CorporationsAct,9' for example, require two-thirds shareholder approval for the performanceof certain acts. The difference between the two-thirds requirement and unanimi-ty is, in my opinion, merely a matter of degree and a reflection of the greaterpossible fragmentation of participation in a corporation as well as the greaterstake which partners can have in the partnership. The protective mechanisms inboth cases serve the same purpose: to protect the shareholders from the mostprejudicial acts of managers.

Furthermore, because certain rules of unanimity are suppletive in naturenamely those relating to immoveables" - the partners could set them aside inthe partnership agreement and confer the power to alienate on their manager;and there seems no reason why the partners could not adopt a majoritarianscheme for decision-making. One modem writer, unswayed by the unanimityrequirements, has commented that the partnership's management structure actu-ally illustrates the distinct personality of the partnership, in particular, the rela-tionship of mandatary to principal.'

The Civil Code of Quibec includes at least one important change to themanagement structure that will strengthen the case for moral personality. Forthe first time, partners are presumed to act by majority vote, although changesto the contract of partnership continue to require unanimity (article 2216(2). Itwould seem that the distinction between acts of management and "important"acts remains (article 2213(2)). If the doctrine survives, "important" acts, inclu-ding actions at law, can now be effected by majority vote, or by expressly grant-ing broader powers to the manager (article 2212).9"

C. Unlimited Liability

Limited liability is commonly viewed as a consequence of moral person-ality in Anglo-American and Quebec law.99 According to this logic, the unli-mited liability of partners, set out in articles 1854, 1865 and 1870 C.C.L.C.,excludes consideration of the partnership as a distinct moral person.

But is unlimited liability really inconsistent with moral personality? Oneway to reconcile the two conceptually is to think of the shareholders or partnersas the sureties of the moral person. A shortfall in the partnership patrimonywould then trigger the partners' subsidiary obligation. Such a sui generis notionof suretyship in partnership law would have the advantage of respecting the dis-tinct patrimonies and personalities of partners and partnership, while providing

9-Ss 173ff.96Art. 1851 C.C.L.C. begins, "If there be no special stipulation as to the management of the busi-

ness of the partnership, the following rules apply: ......97As long as the mandataries act within the scope of their authority and in the interests of the

partnership, they bind the partnership (Smith, supra, note 8 at 467).9sOddly, the Civil Code of Quebec also assimilates the administration of undivided property to

that of a moral person. See, for example, majoritarianism (art. 1026(1)).99Klein & Coffee, supra, note 12 at 139; M. Martel & P. Martel, La compagnie all Qudbec: les

aspects juridiques (Montreal: Thlme, 1984) at 1.7ff.

1014 [Vol. 37


an allocation of risk different from the corporate model."° As I show below, thisnotion of suretyship has in fact evolved in Quebec law, and at least one case,citing French authority, has expressly stated that a partner's liability resemblessuretyship.1"'

According to the basic principles of suretyship, the surety is not bound tofulfil his or her obligation, unless the principal debt is due and the debtor hasdefaulted.1"2 If the partnership is the principal debtor, and liable for the principalobligation, and the partners are the sureties, the creditors should be required tosue the partnership on a partnership debt before trying to recoup a debt from theindividual partners. In the partnership context, the suretyship is sui generis inthat it is not contractual, but arises by operation of law.

Textual support for a sui generis notion of suretyship is tenuous. For exam-ple, many authorities have cited article 1899 C.C.L.C. However, as we haveseen, the article only comes into effect at dissolution, commanding the partner-ship, the individual partners or their liquidators to apply partnership property inpayment of partnership creditors and partner property in payment of their per-sonal creditors. Before dissolution, nothing in the article forces a creditor of thepartnership to prove against the partnership before turning to the individual part-ners, or prevents a creditor of an individual partner from proving first againstthe partnership. Even article 1991 C.C.L.C., which extends the preferences inarticle 1899 C.C.L.C. to actions prior to dissolution, does not necessarily havethis effect. 3 Quite the contrary, partners in a civil partnership "are ... liable" tothe creditor of the partnership in equal shares although their shares in the part-nership are unequal (article 1854 C.C.L.C.). 1 Partners in general partnerships(article 1865 C.C.L.C.) and anonymous partnerships (via article 1870 C.C.L.C.)

1°°However, some French jurists argue that unlimited liability without a sui generis notion ofsuretyship is not inconsistent with moral personality (Aubry & Rau, Droit civilfrangais, vol. 6,7thed. (Paris: Librairies Techniques, 1975) at 57; Cass. civ. 3e, 6 February 1969, D.1969.Jur.434(Annot. B. Bouloc). The real issue, they write, is whether the parties intended the obligations ofthe partnership and the personal obligations of the partner to be on an equal footing. If this is nottheir intention, it is up to the parties to stipulate that their creditors first sue the partnership. Theissue is reduced to one of contractual intention, rather than hinging on the nature of partnership.It is difficult to accept this reasoning because, taken to its logical end, one would have to concludethat moral personality or a distinct patrimony are also merely matters of intention. Also, if part-nership creditors are allowed to sue the partner directly, they are placing themselves among, andperhaps prejudicing, the creditors of the individual partner, even though the partnership patrimonymay be sufficient to meet their claims.

'01Brasserie de Beauport v. Dinan (1898), 14 C.S. 284 at 285: "Comme le dit Pardessus, 'la soli-darit6 que la loi 6tablit entre les membres d'une soci~t6 commerciale, tient plus du cautionnementque de la qualit6 de simples drbiteurs."'

102Arts 1929, 1941 C.C.L.C. The principle is the same in the Common law: the creditor mustexhaust the property of the principal debtor (discussion) towards the satisfaction of the debt, beforehaving recourse to the surety (H.C. Black, ed., Black's Law Dictionary, 6th ed. (St. Paul, Minn.:West, 1990) at 467).

103Although a promising source of this interpretation, it was not relied on by authorities citedbelow, indicating that general principles, and not textual interpretation, are at play.

104Art. 1854 C.C.L.C. reads as follows:1854. Partners are not jointly and severally liable for the debts of the partnership. They

are liable to the creditor in equal shares, although their shares in the partnershipmay be unequal.This article does not apply in commercial partnerships.

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"are ... liable" in solidarity for the obligations of the partnership. 5 The abovearticles strongly suggest that partners obligate themselves at the same time theyobligate the partnership" 6 and are personally liable for partnership debts, notonly if the partnership patrimony proves insufficient, but concurrently. The obli-gations created by articles 1854 and 1865 should therefore be treated in thesame way as any other joint or solidary obligations. If one views partnership asa distinct person with a distinct patrimony, this result is unacceptable becauseit leaves open the objection that unlimited liability precludes moral personality.

The evolution of a sui generis notion of suretyship in partnership waslargely a doctrinal and jurisprudential creation, driven by the same forces thatled to the recognition of a distinct partnership patrimony: the use of patrimonialdistinctiveness as a suppletive rule. The change in approach occurred in theyears just before and immediately following codification. In the 1854 case ofTator v. McDonald,"7 Day J. of the Superior Court"0 ' held that a creditor couldsue one of the partners on a partnership debt without first having sued the part-nership."° Smith J., while concurring on the grounds of practice, added that hepersonally thought no such action could lie because a partnership "is a distinctperson - personne civile."1'n Therefore, he concluded that the action shouldhave been brought against the partnership."' Smith J.'s interpretation wasadopted in subsequent cases.1 In Jobin," the Court cited article 1899 C.C.L.C.

105Mignault wrote that this is what distinguishes partnerships from corporations (supra, note 42at 330-31). However, this is no longer a valid distinction in practice. For example, in the case ofclosely held corporations, it is common for lenders to insist that the shareholders personally guar-antee the corporate debt.

106Ibid. at 331.1711854] Montreal Condensed Reports 84 (Sup. Ct) [hereinafter Tator].1°Charles D. Day, one of the codifiers of 1866. His views may reflect the intentions of the codi-

fiers in drafting the law of partnership.1'gThe Court noted that any other conclusion would be an exception to the rule of "solidarit6"

(supra, note 107 at 84).110For this he cited C.B.-M. Toullier, Le droit civilfrangais, vol. 5, ed. by J.-B. Duvergier (Paris:

Jules Renouard, 1839) para. 381; J.M. Pardessus, Cours de droit commercial, vol. 4, 5th ed. (Paris:Nave, 1841) para. 1026.

111He also noted that the doctrine of solidaritd had no application because this contract was notwith any partner or group of partners, but with the partnership as an entity (supra, note 107 at 84).It is arguable that the majority was correct if the principle of art. 1105(3) C.C.L.C. is applied: com-mercial obligations are presumed to be solidary. Thus, in a commercial partnership, the partnersare liable in solidarity with the partnership.

1121n Cassant v. Perry (1863), 7 L.C. Jurist 108, the Superior Court held that it was not com-petent for a creditor of a note signed in the name of the partnership to bring an action against oneof the partners alone when there was no allegation in the declaration that the firm was dissolved.In Stadacona Bank v. Knight (1875), 1 Que. L.R. 193, the Court gave Tator an extremely limitedinterpretation, amounting to overruling it: Tator applies only to suits launched after the dissolutionof the firm. Otherwise, a creditor of the partnership cannot sue a partner without having first proventhe existence and scope of the debt against the partnership. Upon dissolution, the partners couldbe sued individually because the partnership no longer exists for this purpose. See also Hill v.Ledoux (1912), 14 Que. P.R. 319, confirmed on appeal. Mignault wrote that Tator stood for theprinciple that a creditor has the right "s'il le veut, de poursuivre l'un des associfs sans mettre lesautres en cause." [emphasis added] "[L]es autres" is a reference to the other partners, even thoughthe judgment in Tator clearly states that the creditor need not sue the "co-partnership" (meaningpartnership) before suing the partner (supra, note 8 at 232).

n13Supra, note 23.

1016 [Vol. 37


for the principle that the partnership has a distinct patrimony and must be suedfirst on a partnership debt. This interpretation is now considered settled law bythe doctrine."'

The elaboration of a sui generis notion of suretyship has also beenachieved in the face of article 1838 C.C.L.C., dealing with the execution ofjudgments against the partnership. The article states that any judgment renderedagainst a partner of an existing partnership, "for a partnership debt or liability,"may be enforced by process of execution against partnership property in thesame manner as if the judgment had been rendered against the partnership.1 5

What is striking here is that the article seems to provide for a situation in whicha partner has been sued first on a partnership debt - a situation that jurispru-dence and doctrine tell us cannot happen until dissolution. Article 1838 readsas a general rule applicable to all civil and commercial partnership and theauthorities have treated it as such."6 But if a creditor cannot sue a partner on apartnership debt, the second part of the article is deprived of much of its mean-ing."7 This is another good example of the systemic pressure to give effect toa distinct partnership patrimony and, perhaps, to its distinct moral personality.Its force is such as to interpret a provision of the Code virtually out of existence.

The development of a sui generis notion of suretyship illustrates thatunlimited liability is not necessarily inconsistent with moral personality. Thelegal result is not proscribed by any express provision of the Code, certainly notby articles 1854 or 1865. It is also worth noting that the Civil Code of Quibec,in its provisions on condominiums (divided co-ownership of immoveables), hasrecognized that the members of a moral person (article 1039) can be subject tounlimited liability (article 1078).

" 4Smith, supra, note 8 at 465; L'Heureux, supra, note 8 at 182. Contra: Mignault, despite hisinterpretation of Tator, seemed to think that the creditor could sue the partner directly (supra, note8 at 214, 232). See also Grenier v. Simoneau (1914), 45 C.S. 329.

"5Art. 1838 C.C.L.C. reads as follows:1838. The service of summons or process, for any claim or demand founded upon any

liability of an existing partnership, at the office or place of business of such part-nership within the province of Canada, has the same effect as a service madeupon the members of such partnership personally, and any judgment renderedagainst any member of such existing partnership, for a partnership debt or lia-bility, may be enforced by process of execution against the partnership propertyin the same manner as if the judgment had been rendered against the partnership.

" 6Mignault, supra, note 8 at 192; Roch & Par6, supra, note 8 at 365-67; Perrault, supra, note8 at 433; Case Comment, supra, note 23 at 571. None of this doctrine distinguishes between theapplication of the first and second parts of art. 1838 C.C.L.C. See also Sykes v. Dillon (1905), 28C.S. 230. Art. 1838 originates in an 1848 statute of the united Province of Canada dealing withpublicity of partnerships, and could be regarded as a "foreign" graft upon the Civil law. See AnAct to Facilitate Actions against Persons Associated for Commercial Purposes, and against Unin-corporated Companies, S. Prov. C. 1848, c. 45. The substance of art. 1838 C.C.L.C. formed at thattime the latter part of s. 4 of the statute. The Consolidated Statutes of 1861 made the substanceof art. 1838 into a separate provision (An Act respecting Partnerships, supra, note 26, s. 4(3)).

"7 1t might still apply where a creditor sues all the partners, but without naming them as carryingon business in partnership. The article would ensure that the creditor could execute against part-nership property and not only the personal property of the partners. It might also apply to an actionlaunched after dissolution, but before liquidation.

1992] 1017


In a curious lapse in doctrine and jurisprudence, a rule based on indivisionremains once creditors of the firm obtain a judgment against the partnership ona partnership debt. These creditors may then execute against the individual part-ner's property without first discussing partnership property."n Although no deci-sion has expressly overruled this interpretation, several cases in obiter havestated that a creditor should first discuss partnership property before executingagainst the partners." 9 The Civil Code of Quebec abolishes the aberrant rule infavour of one consistent with a distinct patrimony and moral personality.'2

D. Incapacity to Sue in its Name

The capacity to sue and to defend legal actions without the need to nameall the partners, shareholders or members, is considered to be one of the funda-mental attributes of moral personality.' In Quebec, a commercial partnershipcan be served at its place of business (article 129 C.C.P) and a civil partnershipcan be served at its office (article 1838 C.C.L.C.)." A commercial partnershipcan also be sued in its name (article 115 C.C.P), and where commercial part-nerships have failed to file a declaration (article 1834 C.C.L.C.), they can besued in the name of one or more of the partners under the firm name (article1837 C.C.L.C.). Otherwise, a civil partnership can only be sued by naming allthe partners, and jurisprudence has held that neither a civil nor a commercialfirm in Quebec can sue in its name.' 3

Support for this incapacity is based on three distinct grounds: First, someauthorities, influenced perhaps by English law or based on the principles oforganized indivision, treat the incapacity to sue as an inherent characteristic ofpartnership. 124 Second, the provisions respecting the management of the partner-

118Carmel v. Asselin (1884), 28 L.C. Jurist 28 (Circ. Ct); L'Heureux, supra, note 8 at 183; Sta-dacona Bank v. Knight, supra, note 112 at 194. This clashes with the logic of a sui generis notionof suretyship.

1191n Jobin, supra, note 23 at 570, the Court noted: "L'ex~cution de la condamnation prononcdecontre la soci~t6 devait se tenter d'abord sur ses biens. Avant que ce moyen n'ait W 6puis6, aucuneplainte ne pouvait 8tre port~e contre les associ~s." See also Duval v. Duval (1926), 28 Que. P.R.242 at 255, both cases relying on art. 1899 C.C.L.C.

12°Art. 2221(2) C.C.Q. reads as follows:2221....

Before instituting proceedings for payment against a partner, the creditors shallfirst discuss the property of the partnership; if proceedings are instituted, theproperty of the partner is not applied to the payment of creditors of the partner-ship until after his own creditors are paid.

In the current law, the right of preference in favour of creditors stems from art. 1991 C.C.L.C.121Bohrmier & Ct , supra, note 8 at 27; Monk, supra, note 6 at 500. Planiol & Ripert write

that allowing managers of a partnership to sue is a necessary consequence of moral personality(supra, note 49, para. 1957).

121n France, art. 69 of the old French code of procedure, which allowed a commercial firm tobe served at its "maison sociale," was considered strong evidence that the partnership was a person(Ripert, supra, note 4, para. 681).

123Dupuis, supra, note 59.'24Mignault, otherwise a strong supporter of the theory that partnerships are moral persons,

wrote that partnerships are not moral persons to the same degree as corporations. Therefore, theyare not be apt to launch actions in their own name without naming the partners (supra, note 8 at187).

1018 [Vol. 37


ship patrimony have been interpreted to prohibit managers or partners acting ona presumed mandate from performing "important" acts, such as the alienationof immoveables." Initiating actions in law has been included within the classof "important" acts. Third, the presumed intention of the legislator not to allowcivil or general partnerships to sue in their names can be inferred from article1884 C.C.L.C., which expressly allows suits in relation to the business of a li-mited partnership to be brought by or against the general partners,'16 as well asfrom article 60(1) C.C.P.,'27 which allows any "group of persons associated forthe pursuit of a common purpose ... but which does not possess a civil person-ality and is not a partnership [emphasis added]" to defend an action in its name.Article 60(2) only accords the right to sue to labour unions.

There is no question that this state of affairs is an impediment to the civilexistence of the firm and that it casts doubt on whether partnership is a fullmoral person. This has led some Quebec authors to argue that the incapacity tosue, and in some cases, to defend actions, proves that partnership is a"restrained" moral person.'2

But is the capacity to sue really so fundamental to moral personality? Inmy opinion, it is not. The fact that the French jurisprudence accorded the sameright to all assocations, even those without moral personality, has led someFrench authors to question the connection between moral personality and thecapacity to sue. 29 Likewise, in the Common law jurisdiction of Ontario, wherepartnerships are not moral persons, a partnership may sue and be sued in itsname. '3 It is also true that the incapacity to sue of a minor or a person underprotective supervision does not lead to the conclusion that they are .not persons.

Should the courts have implied a right to sue? There is no express bar tothis result, the closest being article 60 C.C.R, which is vague at best"', as wellas the existence of express provision, such as article 1884 C.C.L.C. One can also

l2SL'Heureux, supra, note 8 at 178.126This is a unique form of partnership in which the special partners benefit from limited liability

and only the general partners may manage the firm. Limited liability and a reduced managerialclass assimilates the limited partnership to the corporation.

1270riginally arts 81a, 81b C.C.P., introduced by S.Q. 1960, c. 99, s. 6. Art. 60(1) C.C.P readsas follows:

60. Any group of persons associated for the pursuit of a common purpose in Quebec,but which does not possess a civil personality and is not a partnership within themeaning of the Civil Code, may nevertheless defend any action at law takenagainst it.

12"his incapacity is the reason why Trudel views partnership as organized indivision (supra,note 9 at 456). In Brown v. Taylor, supra, note 9, the Court held that the inability to sue in its namemeant that the commercial partnership was not a moral person.

129Planiol & Ripert, supra, note 49, para. 1957.130 Ontario, Rules of Civil Procedure, 0. Reg. 560/84, r. 8.01 (1).131Although the term "partnership" is juxtaposed against groups with a right to defend actions

in their names, such groups are also juxtaposed against an entity with a "civil existence," such asa corporation, which certainly does have this right. Also, art. 115 C.C.P clearly gives commercialpartnerships the capacity to defend actions, which suggests that the use of the general term "part-nership" here was meant only to clearly delineate the "group" targeted by the first clause. In otherwords, art. 60 C.C.P. is not relevant to a partnership's capacity.

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question the classification of all actions in law within the same category as thealienation of immoveables, as "important" acts, 132 especially if the actioninvolves moveables. 133 In the same way that the notion of patrimonial distinc-tiveness has been used to supplement the law, the courts might have implied acapacity to sue in order to allow a partnership to engage its patrimony. Giventhe general view that the capacity to sue normally follows civil existence, thefailure of the legislature to expressly grant the right or of the jurisprudence toimply it, strongly suggests that partnerships are not moral persons."34 In fact,although Part I illustrates that courts have been willing to supplement the lawusing patrimonial distinctiveness, they have not been willing to imply the attri-butes of moral personality, such as a right to sue.

Changes to the law under the Civil Code of Qudbec will, however, grantpartnerships a right to sue and be sued in their names (article 2225 C.C.Q.),which will certainly strengthen the case for moral personality.

E. Validity of Contracts between Partner and Partnership

An important advantage of moral personality is the ability of shareholdersto contract with the moral person. A partnership can contract with third partiesand the partnership itself is the result of a contract between partners. But can apartner contract, not with his or her co-partners, but with the partnership itself?The situation here is different from the creditor-debtor relationship discussed inPart I because those rights and obligations arose out of the contract of partner-ship, and not from subsequent contracting between partner and partnership. Forexample, could a partner lease an immoveable to his or her partnership? Thereis no question that a partner can contribute a right of enjoyment to the firm, 3

and any rent due could be credited the partner on the partnership books. Butcould this take the form of a valid Title Seventh lease with all the rights andobligations incidental to it?

There is some suggestion in the jurisprudence that a contract between thepartnership and a partner would be valid. For example, in one case a Courtappears to have recognized the sale of an immoveable owned by a partnershipto one of the partners. 36 In another case, a Court held that a partner can be an

132An action in law can have important financial consequences for a business. However, anaction undertaken under a presumed mandate (art. 1851(1) C.C.L.C.) or by a manager appointedby an instrument posterior to the contract of partnership (art. 1849 C.C.L.C.) can be halted by anyof the partners. A frivolous action launched by a manager charged with the management by virtueof a special clause in the contract of partnership can be halted with "sufficient cause" (art. 1849(2)C.C.L.C.). This power to stop a prejudicial action cannot be said of an alienation of rights whichis irrevocable.

133

1f the basis of the restriction is the principle that the nature of an action follows the natureof the right it asserts or defends, then only real actions involving immoveables should require una-nimity, not those involving moveables, including personal actions.

134Cantin Cumyn, supra, note 3 at 1039-40.

135L'Heureux, supra, note 8 at 173.136In Girard, supra, note 24, two partners executed a deed of sale (called a provisional partition)

of immoveables owned by the partnership in favour of the partner running in an election in orderto allow him to qualify. The Court held that the deed was not a provisional partition, but a sale

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employee of his or her own partnership, necessarily implying that a contract ofemployment must have arisen between the parties. 137

But enforcement is a much more difficult issue, raising great uncertainty.Jurisprudence and doctrine suggest that a partner can sue the firm directly.138

Even in Common law jurisdictions, where such an action is regarded as theequivalent of a partner suing himself, one American jurist has noted that theprocedural obstacles to the action do not affect the existence of the obligation.139

A partnership could sue the contracting partner in the name of one or moreof the other partners, using article 1839 C.C.L.C.40 But given that the contractarises at arm's length, the actio pro socio is probably unavailable, and the part-nership would have to sue as a third party. This, however, is an impossible sit-uation, because all the partners would have to be named, including the defend-ing partner! One suggested solution, whether the creditor is the partnership ora partner, is to assign the obligation to a third party, who would then be free toenforce it.'

In summary, a strong case can be made for the validity of such contracts.In fact, the existence of a separate partnership patrimony alone should permittheir formation. On the other hand, the uncertainty of the law in this area andprocedural obstacles to enforcement, not present in corporate law, do howeverweigh against the recognition of moral personality. The Civil Code of Quibecallows partnerships to sue and be sued in their names (article 2225), whichcould be interpreted to allow the enforcement of arm's length contracts andopen the way to the recognition of full moral personality.

for a determined price made by one of the partners of his rights in the immoveables, but also ruledthat the money was owed to the partnership. The Court appears to be confusing two visions of part-nership. If a partnership has a separate patrimony, a partner does not own rights in any specificthing in the patrimony of the partnership. Thus, a partner cannot cede his rights in the immovables,but only his or her share in the partnership patrimony as a universality. But even if he or she didcede the share, the partner acquiring the immoveable would owe the other partner for the sale -not the partnership. Therefore, given the reference to a debt owed to the partnership, the casemay stand for the proposition that a contract of sale can arise between a partner and the partner-ship.

137No 1, supra, note 11. One of two partners was killed in a car accident. The widow then triedto sue the surviving partner by virtue of s. 8 of the Workmen's Compensation Act, R.S.Q. 1941,c. 160, which allowed an action against all persons other than the employees of the company. TheCourt dismissed the action on the grounds that the defendant was an employee of his own partner-ship, noting that a partnership is a distinct person from the partners (ibid. at 6) and, therefore, part-ners could be treated as agents or employees of the partnership. See also Verschelden, supra,note 8; Harrisson, supra, note 65, where the partner was engaged as foreman in his own partner-ship.

l381f it is commercial, by virtue of art. 115 C.C.P or if it is civil, by summoning all the partners,including the plaintiff (Harrisson, ibid.).

139Crane, supra, note 7 at 312. A movement towards the entity theory in a Common law juris-diction can be seen in Geisel v. Geisel (1990), 66 Man. R. (2d) 153, 72 D.L.R. (4th) 245 (Q.B.)where the Court held that partners could sue their partnership in negligence. See an account of thecase in S. Ellis, "Deceased farmer's estate and family can sue former partner in Manitoba negli-gence suit" The Lawyer's Weekly (24 August 1990) 1.

140 See Whimbey v. Clark, supra, note 60.141Crane, supra, note 7 at 314.

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Conclusion

Partnerships created under the Civil Code of Lower Canada have patrimo-nies distinct from those of the individual partners. Moreover, the interpretationof the Code clearly shows the use of patrimonial distinctiveness as a suppletivetool where the Code is silent or ambiguous.

But, the existence of a distinct patrimony can no longer be taken as suffi-cient to justify a conclusion that partnerships are moral persons. This is due tothe increasing acceptance in Quebec law of the possibility of autonomous patri-monies. On the other hand, the notion that partnerships are "restrained" moralpersons must be rejected as an inadequate explanation of a partnership's nature.

The structure of the Code, the management structure of partnerships andthe unlimited liability of partners are compatible with a notion that partnershipsare moral persons. Further, the recognition that partnerships are moral personsis conceptually more attractive than the hybrid notion of autonomous patrimony.However, the incapacity of partnerships to sue in their names, the adoption inQuebec of the English technique of incorporation, as well as the uncertain statusof a contract between partner and partnership remain serious obstacles to theconclusion that partnerships are recognized as moral persons. Further, althoughan early proposal for reform of the Civil Code explicitly recognized the partner-ship as a moral person,14 this provision is not to be found in the Civil Code ofQuibec as recently adopted. Rather, article 2188 C.C.Q. states explicitly thatjoint-stock companies are moral persons, without specifying the status of part-nerships.143 This can mean one of two things: either the legislature does not wishto grant moral personality to partnerships; or it seeks to allow doctrinal andjurisprudential evolution to determine whether partnership has accumulated suf-ficient legal attributes to attain moral personality. The latter seems more likely,given that, in other respects, the Civil Code of Qudbec strengthens the argumentthat partnerships are full moral persons by granting them the right to sue and besued in their names,"4 limiting the requirements for unanimity in the manage-ment structure1 45 and forcing creditors of the partnership to first discuss partner-ship property.1 46 But as the law stands, partnership appears to be best defined asan autonomous patrimony.

The question remains open as to whether it would not be better to make theleap from autonomous patrimony to fully recognizing partnerships as moral per-sons. Although the current law makes this leap difficult, though not implausible,the Civil Code of Quebec provides additional material for this doctrinal devel-opment. It is perhaps exactly the need for further doctrinal development thatmade it preferable that the legislator remain silent on the question.

142Draft Bill, supra, note 13, art. 2251.143Art. 2188(2) C.C.Q. reads: "Partnerships may also be joint-stock companies, in which case

they are legal persons."144Art. 2225 C.C.Q.145See text preceding note 97.146Art. 2221(2) C.C.Q.

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The recognition of a partnership's moral personality is not an attempt to"corporatize" what is a distinct institution serving a distinct economic function.Instead, it serves to give legal effect to a psychological sense that partnershipsare distinct from their members. Civil law systems have also found moral per-sonality to be an ideal way of understanding and regulating the pooling of assetsto serve common purposes, a solution which, although it is not fully exploitedin Quebec law, is certainly available to resolve the riddle of a partnership'snature.

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